Friday, April 15, 2016

The Gimlet Eye: Sterling started strong, but finish line eludes~

15 April '16

Sterling had a good first half to the week as UK inflation for March exceeded expectations. However, on Thursday, the pound was undermined against the US dollar as the Bank of England made it clear that the economic risks, especially for the finance sector, of a Brexit were significant.

Sterling started strong, then faltered Sterling made gains across the board throughout the start of the week before stumbling somewhat on Thursday.

Although no significant market data was released on Monday, sterling found support as investors looked to cash in profits from the negative sterling movement seen the previous week. UK inflation data for March was released on Tuesday, and with an increase of 0.5% beating economists’ forecasts and showing the highest growth in over a year, sterling took further positive steps against its major trading partners.

This positive sentiment lasted into Wednesday, as sterling reached two-week highs against both the euro and US dollar as retail sales in the US showed a surprise contraction. Sterling struggled on Thursday however, losing all the gains seen against the US dollar throughout the week, and falling away from recent highs against the euro as Bank of England (BoE) policy makers voted unanimously to keep interest rates on hold.

There is little data released today which is likely to lend support to sterling, with only construction output data expected from the UK. Investor sentiment will instead be turned towards the US, where consumer sentiment figures could see the dollar struggle should they disappoint in the same fashion as Wednesday’s retail sales data.
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